Appeals Court Orders Appointment Of Examiner For FTX

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Appeals Court Orders Appointment of Examiner for FTX PlatoBlockchain Data Intelligence. Vertical Search. Ai.

The US federal appeals court has ordered the
appointment of an independent bankruptcy examiner to investigate the collapse
of FTX, the cryptocurrency exchange once headed by the now-convicted Sam
Bankman-Fried.

This decision, reversing a prior ruling, followed
the alleged misappropriation of a staggering $10 billion in customer assets,
bringing to light a case with profound implications for FTX’s global investors
and the volatile cryptocurrency industry.

According to a report by Reuters, the 3rd US Circuit
Court of Appeals in Philadelphia justified this decision, mentioning that the
appointment of an independent examiner is mandatory under the US Bankruptcy Code. This step was attributed to the significant scale of
FTX’s case, alongside allegations of misappropriation of funds before the
collapse of the cryptocurrency exchange.

Emphasizing Congress’s intent, the court underscored
the necessity to safeguard debtors and creditors in this case. FTX’s Chapter 11 reorganization demands scrutiny, given the
far-reaching implications of its collapse on the cryptocurrency industry’s
evolution and volatility.

Judge Felipe Restrepo highlighted the
significant losses FTX’s investors suffered and the broader
ramifications for the cryptocurrency sector. The events leading to the bankruptcy of the company have raised crucial
questions about the resilience of the industry and the need for regulatory
safeguards.

In contrast, John Ray, the successor of Sam Bankman-Fried, and a committee of unsecured FTX creditors have
reportedly opposed this move, citing duplication of efforts and high costs that
would reduce the funds available for distribution.

Appeals Court Reverses Decision

The appeals court’s decision marks a reversal of a ruling by US Bankruptcy Judge John Dorsey in February last year, which sided with
FTX’s argument that a probe could incur a staggering cost exceeding $100
million.

Following Bankman-Fried’s conviction on seven counts of fraud
and conspiracy, John Ray assumed the role of the Chief Executive Officer. The legal
battle surrounding FTX’s collapse adds a layer of complexity to Ray’s
involvement, considering his experience in managing Enron post-bankruptcy.

Bankman-Fried, now convicted, faces sentencing on
March 28, with expectations of an appeal. Prosecutors allege that the FTX’s Co-Founder looted billions from customers, contributing to the collapse, in a
bid to support his Alameda hedge fund.